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Can Someone actually show me step by step how to slove this problem. 2. Two copy machines are available. Both have useful lives of 5
Can Someone actually show me step by step how to slove this problem.
2. Two copy machines are available. Both have useful lives of 5 years. One machine can be either leased or purchased outright; the other must be purchased. Hence there are a total of three options: A, B and C. The details are shown in the table (the first year's maintenance payments, occurring at the beginning of each year, followed by revenues from resale.) the present values of the expenses of these three options using a 10% interest rate are also indicated in the table. According to a present value analysis, the machine of least cost as measured by the present value, should be selected; that is, option B Initial outlay Yearly expense Resale value Present value (@10%) | 31,359 Option A is a lease; Option B and C are purchase of two alternative machines. All have 5-year lives 6,000 8,000 0 30,000 2,000 10,000 30,131 35,000 1,600 12,000 32,621 It is not possible to compute the IRR for any of these alternatives, because all cash flows are negative (except for the resale values). However, it is possible to calculate the IRR on an incremental basis. Find the IRR corresponding to a change from A to B. Is a change from A to B justified on the basis of IRRStep by Step Solution
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